Because house prices in expensive areas still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment. Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times their income with tiny downpayments, and gross rents are still only 3% of purchase price. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that affluent neighborhoods are still in a huge housing bubble, and that bubble seems to be getting more dangerous by the day.

On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.

Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district. In rich neighborhoods, annual rents are typically only 3% of purchase price while mortgage rates are 4% with fees, so it costs more to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 8% of purchase price, which is more than twice the cost of renting and wipes out any income tax benefit.

The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:

So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.

Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.

Because it's a terrible time to buy when interest rates are low, like now. House prices rose as interest rates fell, and house prices will fall if interest rates rise without a strong increase in jobs, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down. When housing falls, you lose your equity, but not your debt.

The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.

It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.

A low price lets you pay it all off instead of being a debt-slave for the rest of your life.

As interest rates fall, real estate prices generally rise.

Your property taxes will be lower with a low purchase price.

Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house. Then you will not be able to refinance because then you'll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.

You can refinance when you buy at a higher interest rate and rates fall, but current buyers will never be able to refinance for a lower interest rate in the future. Rates are already as low as they can go.

Because buyers already borrowed too much money and cannot pay it back. They spent it on houses that are now worth less than the loans. This means most banks are still actually bankrupt. But since the banks have friends in Washington, they get special treatment that you do not. The Federal Reserve prints up bales of new money to buy worthless mortgages from irresponsible banks, slowing down the buyer-friendly deflation in housing prices and socializing bank losses.

The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.

As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get

paid back.

And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.

It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.

This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.

Because buyers used too much leverage. Leverage means using debt to amplify gain. Most people forget that debt amplifies losses as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or a mortgage rate adjustment, he lost 100% in the real world.

The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.

The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.

It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the RealtorÃ‚Â® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.

Because the housing bubble was not driven by supply and demand. There is huge supply because of overbuilding, and there is less demand now that the baby boomers are retiring and selling. Prices in the housing market, even now, are entirely a function of how much the banks are willing and able to lend. Most people will borrow as much as they possibly can, amounts that are completely disconnected from their salaries or from the rental value of the property. Banks have been willing to accomodate crazy borrowers because banker control of the US government means that banks do not yet have to acknowledge their losses, or can push losses onto taxpayers through government housing agencies like the FHA.

Because there is still a massive backlog of latent foreclosures. Millions of owners stopped paying their mortgages, and the banks are still not forclosing on all of them, letting the owner live in the house for free. If a bank forecloses and takes possession of a house, that means the bank is responsible for property taxes and maintenance. Banks don't like those costs. If a bank then sells the foreclosure at current prices, the bank has to admit a loss on the loan. Banks like that cost even less. So there is a tsunami of foreclosures on the way that the banks are ignoring, for now. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price. Right now, those foreclosures will wash over the landscape, decimating prices, and benefitting millions of families which will be able to buy a house without a suicidal level of debt, and maybe without any debt at all!

Because first-time buyers have all been ruthlessly exploited and the supply of new victims is very low.

"We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."

House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.

The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.

Because boomers are retiring. There are 70 million Americans born between 1945-1960. One-third have zero retirement savings. The oldest are 66. The only money they have is equity in a house, so they must sell. This will add yet another flood of houses to the market, driving prices down even more.

Because there is a huge glut of empty new houses. Builders are being forced to drop prices even faster than owners, because builders must sell to keep their business going. They need the money now. Builders have huge excess inventory that they cannot sell at current prices, and more houses are completed each day, making the housing slump worse.

You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.

The median home value in Sacramento is $283,800. Sacramento home values have gone up 11.8% over the past year and Zillow predicts they will rise 5.4% within the next year. The median list price per square foot in Sacramento is $193, which is lower than the Sacramento Metro average of $213. The median price of homes currently listed in Sacramento is $269,900. The median rent price in Sacramento is $1,340, which is lower than the Sacramento Metro median of $1,575.

because house prices decreased more than $8,000, which would have wiped out the $8,000 credit.

that $8,000 credit was just another way the government tried to prop up and "save" the housing market. they basically artificially inflated the market, so to speak. they should have just stayed out of it, as markets, all markets, go up and down and eventually correct themselves.

because house prices decreased more than $8,000, which would have wiped out the $8,000 credit.

that $8,000 credit was just another way the government tried to prop up and "save" the housing market. they basically artificially inflated the market, so to speak. they should have just stayed out of it, as markets, all markets, go up and down and eventually correct themselves.

What about the subsequent years? Seems to me you did not dodge the bullet.

the median housing price (specifically, the area i was looking at) decreased further than 8K, though. at the time, housing was on the downward slope, and the government was trying to help. people were buying into it, though, which is their decision. i'm just glad i didn't, especially since life has changed since that time. i'm hoping to buy on the upward slope, but that will be difficult. i've already missed it (2011). it'll eventually go down again - just not sure when.

The median home value in Sacramento is $283,800. Sacramento home values have gone up 11.8% over the past year and Zillow predicts they will rise 5.4% within the next year. The median list price per square foot in Sacramento is $193, which is lower than the Sacramento Metro average of $213. The median price of homes currently listed in Sacramento is $269,900. The median rent price in Sacramento is $1,340, which is lower than the Sacramento Metro median of $1,575.

The medium price of housing means nothing if the school system is in shambles and school Administrators are in denial. Violence will overtake reality and the cycle of abandonment will continue. Philadelphia, St Louis, Gary Indiana, Wilmington Delaware. How much Real Estate has violence destroyed. Billions! Violence has caused the financial ruin for homeowners and business? These cities and towns will never be recover or rebuild. The once fine homes abandoned by prosperous families are nothing but burned out shells now. Americans that live far from the havoc are deluding themselves believing they are immune. They are living on a financial cliff unaware it is being undermined by a current of experimental socialism. Undermined by excessive Real Estate taxation and federal meddling in the schools and housing mandates. The burden of taxes is throw on the remaining home owners .

You are all wrong....housing price never changes. The currency changes by constantly losing value. Housing may temporarily fluctuate, but it always rises in value given enough time. Inflation is guaranteed by central banks.

You are all wrong....housing price never changes. The currency changes by constantly losing value. Housing may temporarily fluctuate, but it always rises in value given enough time. Inflation is guaranteed by central banks.

To summarize: compared to an investment in stocks and bonds, the capital gain after considering ALL costs of buying a house in a great market (San Mateo CA example) was not really better, and would usually be worse.

To summarize: compared to an investment in stocks and bonds, the capital gain after considering ALL costs of buying a house in a great market (San Mateo CA example) was not really better, and would usually be worse.

That article assumes you if you don't buy, you won't have to pay rent and effectively live in the street or basement. You won't refi even though rates went down 20 times over the past t3 decades. Housing is not a return on investment if somehow you think living cost (whether you rent or buy ) is free.

Once that is accounted for, it is guaranteed a long time homeowner in San Mateo is rich as a MXFX.

* That 300K San Mateo home in 1995 is around $2M today.* That interest and property tax you paid for (30 years) is a hell of lot better on renting the same home which is likely around $6K-7K a month.

The only way your finance comes out ahead, (and its not even certain) is you managed to sleep in the streets for the past 30 years and you invested it all in the market. And even then, the San Mateo owner is still likely ahead, (refinancing down, LOC to buy even more assets)

Love this thread. We do have our different opinions and ideas regarding how to perfectly get that 'dream house'. I do believe that housing prices does appreciate but it also would depend on the location. Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house but this should not be of concern if you know how to invest or make use of your house. I am amazed by the properties I was able to look into near Cleveland, Ohio. You might want to have a look at here: https://reilly-properties.com/

The guys who like the idea of buying houses make the mistake that renters cannot save and invest their money. Some do and I did.

House prices rise over time because 1. wages rise 2. population rises 3. demand for housing rises in general in the USA but may vary by location. Prior to 2008, 4. credit available to losers rose also. So, house prices rose rapidly.

To compare them to a good stock mutual fund is not going to show great results in every case, therefore one should not make the generality that a home is always a great idea.

My neighbor paid $250,000 for a 1300 square foot condo in a super nice location in Jupiter Florida prior to the bursting bubble around 2008. I consider Jupiter the most or nearly most desirable location in the state. It quickly lost value and today it is still not worth $250,000 so that is 10 years of no return on capital while meantime paying 1. property taxes 2. HOA fees ($500/month today).

An unfair contrast is the shares of Apple I bought around 2011. Since then they split 7:1 and now I can buy a nice house in Florida with the proceeds when I feel the need to. Show me the house or condo that can grow 7 new bedrooms.

There are deals in crummy areas of the USA if you like to visit them. I think my life is now short to waste time visiting dumps like Cleveland Ohio for example.

You can definitely make money in real estate because the demand is always there; you can also make a bit more investing if you have the discipline to save money and do it.

My location is in an undesirable neighborhood of East SJ. I grew up there and have only ever lived there since it was mostly orchards, vineyards and cow pastures. We have a diverse population of Latinos, Vietnamese, and trashy Haolies like me. No Chinese. No Indians. No Petty Bourgeois whites, no hipster whites. Even the last Filipinos left years ago.

SInce I moved in about 30 years ago, only two homes have changed hands on my street. One was a very many years ago in the early '90s to a savvy workaholic Mexican immigrant who could run circles around everyone. The other was in June 2006. At the Open House, I asked the Realtor what kind of person who could afford this place, would want to live here?

It was 12 years ago, so while I put quotes, it may not be exactly right, but it was something like, "You would be surprised. Lots of people would want to live here."

"But, for those types of people, how on earth could they afford to make the mortgage and taxes on a place like this?"

I'll never forget her words in June 2006, putting me in my place, telling me how I "just didn't get it": "Anyone with a pulse can get a mortgage".

Of course you know what happened next, right? The poor suckers who bought were a large number of working aged adults (no children) living there. It appeared to me, an extended family who had to work like maniacs to combine their money to "get in". Before long that property showed up on Property Shark "preforeclosure". Those poor Greater Fools were out of there in a year or so. Some other folks, also a large extended family of working age adults (no children) moved in, at about 60% of the price the Greater Fools borrowed for.

Now, the property next door to that one is for sale. The senior empty nesters there, selling out to relocate and move in with their adult child. They were on that street before I was, so more than 30 years. I don't think they care if they don't get the Bubblicious Peak Price. Nor does the Realtor, probably: Realtor just wants the sale.

There was a frenzy of activity on Sunday, people coming and going at the Open House. Cars parked all over place, even blocking some neighbors' driveways. It was too busy for me to go there to speak with the Realtor, and besides I was walking the Pit Bull. I looked at the flyer: the pricing they gave, and the supposed rent the website says it could collect, is disingenuous. Also, a bold-faced lie, it said the property tax rate is 0.77%. With the added assessments, I think it's more like 1.2-1.3% range. The taxes alone, will be a huge burden to the type of folks who would choose to live in such a neighborhood. Some poor sucker is going to buy it and wind up like the Greater Fools who bought the home next door 12 years ago. I felt like printing up copies of the Megan's Law map of nearby offenders and stuffing the "take one" flyer box on the For Sale sign.

It's crazy. Those poor fools will not be able to get the full property tax and interest deductions any more, like in the past.

Yep....I just lost 20% of my 401k in the last 3 days. The good thing is that I put 50k away sitting in a crap savings acct earning nothing. All my buds said i am stupid...that was 2 weeks ago. Now they think im smart. 2 of them just bought homes, one is paying $200 IN PMI...he was late to work today...said he didnt sleep. If anyone is wondering whether the stock market is tied to homes. Lehaman Bros. Collapsed weeks before the mortgage crisis. Its 100% tied to housing.

I wonder what your 401K consists of. A year ago the stock market (Wilshire 5000 index) was 26,602, today it's 28,768. That is up 8.1% in a year. I don't like to see the stock market swing downwards but this is pretty normal for it to do.

Looks like clambo beat me to it. What in the actual ass is your 401k positioned in? Yes, the Dow has been in a modest mini correction for the past couple of weeks but fundamentals across the board are decent. For the Dow to reflect your 401k's performance it'd have to lose another 5000 points.

I know, right? If I blamed being late to work on a market turndown affecting my 401k causing a lack of sleep, my boss would probably warn me that not working at all would afford me plenty of time to sleep.